Moody’s: Malaysian Banks Are Well Placed To Manage Challenges

Malaysia’s banking system is well positioned to manage challenges in
economy thanks to strong loss-absorbing buffers and solid capital ratios,
Moody’s Investors Service said in a report on 22 May.

The credit rating agency maintained its ‘stable’ outlook on the banking
system in one of ASEAN’s largest economies.

Malaysian banks are well positioned to manage the challenges associated
with vulnerable oil and gas, real estate, and construction sectors, thanks
to their strong loan-loss reserves and solid capital ratios, Alka Anbarasu, a
Moody’s Vice President and Senior Credit Officer, said, commenting on the
report.

Although Malaysia’s economic growth is expected to moderate this year
and next, domestic private demand will continue to be supported by stable
employment conditions and wage growth, according to Moody’s.

The banks’ capitalisation is forecast to remain stable even under stress.

“Testifying to its resilience, the systemwide capital ratio still satisfies
regulatory requirements even in a stress scenario,” Moody’s said in its
report.

Funding and liquidity at Malaysia’s banks are also seen robust going
forward, as deposit growth keeps pace with moderate loan growth, the
credit rating agency said.

In April 2019, the World Bank said in its East Asia and Pacific Economic
Update
that Malaysia’s economic growth expanded at 4.4 percent and 4.7
percent in the last two quarters of 2018, respectively, with resilient
private consumption. The economy is forecast to grow by 4.7 percent in
2019, and private consumption will continue to be the main driver of
growth. Stable labour market conditions and income support measures
will boost household spending this year.

Malaysia’s economy is forecast to expand at 4.6 percent in 2020, and the
country is expected to achieve high income country status by 2024, the
World Bank said last month.